U.S. auto sales are expected to have dipped slightly in October, as stepped-up incentive spending by automakers could not totally offset the drag from continued turmoil in the U.S. housing market, analysts said.
Vehicle sales, widely watched as a leading indicator of U.S. consumer spending, began slowing in the second quarter and are expected to remain under pressure for the rest of 2007.
With oil prices above $90, choppy stock markets, and renewed economic concerns, the selling environment remains poor for new light vehicle sales, Goldman Sachs analyst Robert Barry said in a note for clients.
But we think October could be boosted by a seasonal increase in incentive spending as (automakers) try to clear '07 inventory to make room for new models, Barry said.
Among U.S.-based automakers, Ford Motor Co is expected to take the hardest hit, with sales seen down from 13 percent to 18 percent in October. Privately held Chrysler LLC is expected to report a 5 to 11 percent sales decline.
General Motors Corp is expected to report sales ranging from down 2 percent to up 2 percent, according to analysts.
Analysts expect the total October sales figure to come in at a seasonally adjusted annual rate of from 16 million vehicles to 16.2 million vehicles, compared with the 16.16 million rate reported in October 2006 by Autodata.
But analysts from Bear Stearns, Lehman Brothers and Goldman Sachs all said they expect sales to be down slightly from a year earlier.
Bear Stearns, which gave a 16 million unit annualized rate forecast, said the industry's performance in August at 16.3 million and September at 16.2 million was the best that could be reasonably hoped for, given the difficult economic climate.
This sustained uptick versus the very depressed sales levels of the early summer is only modestly reassuring, as incentives behavior continues to be muted, and headwinds from housing issues and energy prices remain unabated, Lehman analyst Brian Johnson said in a note.
Lehman expects Toyota Motor Corp, battling to replace GM as the top global automaker this year, to report its fourth consecutive month of lower sales, with a 1-percent decline.
Honda Motor Co Ltd sales are expected to be up 2 percent and Nissan Motor Co Ltd to report a 6 percent rise year-over-year, Lehman said.
October had 26 selling days, one more than the same month a year earlier.
U.S. auto sales rose 1 percent in September after adjusting for an extra selling day a year earlier.
Bear Stearns analyst Peter Nesvold said that GM's increased incentives in October focused on pickups and sport-utility vehicles, while Ford raised customer cash offers on multiple 2008 models and pulled away from zero percent financing.
Chrysler boosted incentives on its new minivans and raised incentives on 2008 model year Jeeps, Nesvold said.